In the world of financial advice, there’s much love in the air for Centralised Retirement Propositions, or ‘CRPs’.
That’s because, in the shifting landscape of pension freedoms, they adapt the Centralised Investment Propositions (CIPs) that have been so effective for accumulation, to make them suitable for decumulation too. That’s maybe why in 7IM’s recent survey of 300 advisers, almost 6 out of 10 said they wanted a CRP in the same way that they have a CIP.
But initial attraction isn’t turning into true love. Why? Because many CRPs are worryingly inflexible, and may not meet the needs of advisers or clients.
Will the money last?
When managing people’s retirement pots, one issue is always centre-stage: how to make that pot last for a lifetime, when we don’t even know how long that lifetime will be.
But the design and inflexibility of many CRPs makes it harder to manage the numbers to meet the goals. They lack back-testing during all market cycles, for instance, and may leave clients vulnerable to sequence risk and risk of ruin.
Costs have to be fair
Next, there’s the issue of costs.
CRPs have clear benefits for advisers – for example, they help you meet your MiFID II and PROD responsibilities around disclosure and client suitability, without requiring you to commit huge resources.
But that’s not really enough if they don’t come at a cost that you or your clients are prepared to pay. In a decumulation environment where clients’ savings are running down over time and disclosure is throwing charges into sharper relief, scrutiny of costs is going to be intense.
CRPs don’t have to be cheaper than other routes, but they do have to be demonstrably fair.
Administration must be easy
There’s a similar story with administration. Responsiveness, flexibility and client experience are crucial, and advisers need a CRP that works at scale for every client.
With many CRPs, set-up and maintenance just take too long.
How 7IM are doing it better
With so many CRPs failing to meet the needs of advisers, 7IM recognised that something better was needed. So, they designed a new solution and called it the 7IM Retirement Income Service (RIS).
They built the service to reflect real life – where circumstances change and flexibility is crucial – but without adding complexity or cost. The 7IM RIS is scalable and easy to use, yet immensely sophisticated behind the scenes. And it’s based on comprehensive modelling and research.
To meet clients’ needs for income requires a continual rebalancing to a target asset allocation in a portfolio. The norm for CRPs is to do this within a specific tax wrapper, for example, in a SIPP or ISA.
But the 7IM RIS is smarter than that. It rebalances across the overall portfolio and multiple tax wrappers, so your clients are in the right place, at the right time, across all their holdings. We’re confident you won’t find this anywhere else.
This post was created for the DISCUS website by 7IM (Seven Investment Management). You can find out more about their investment services here ›